Not a match made in heaven. Ad networks serve as brokers between Website publishers and advertisers, and the benefits for both can be significant.

ThinkEquity listed four ways that ad networks create value:

Creating scale and aggregation opportunities for marketers and, in the process, providing smaller publishers with access to advertiser demand for broad reach.

Providing marketers with a cost-effective broad-reach alternative to the portals and other large Internet media sites.

Creating order in the marketplace for ad inventory by categorizing and segmenting inventory and audiences.

In the case of performance-based networks, minimizing risk for advertisers by guaranteeing results and ROI through the use of click-per-action (CPA) pricing or click-per-thousand (CPM) pricing with CPA targets.

For the most part, advertisers are satisfied with the relationship.

A Collective Media study found that a large majority of advertisers used ad networks in 2008, and even more have plans to do so in 2009.

The reasons varied.

In 2008 (when only one response to the question was allowed), efficiency was the top answer, followed closely by targeting and reach. In 2009, when the survey allowed for multiple answers, most still said efficiency, followed by reach and targeting.

Nearly one-quarter of advertisers plan to spend between 16% and 30% of their budget on ad networks in 2009.

About one-third of advertisers expect to spend 6% to 15% of their budgets with ad networks, and 21% said 1% to 5%. Tellingly, only 10% of advertisers have no plans to include ad networks in their budgets in 2009. Go to article: eMarketer

Ad networks are facing challenges with the online space from a number of different directions, however, including from advertisers and agencies.

Respondents reported limiting their use of—or not using—ad networks due to lack of transparency as to what sites are used (58%), lack of control as to the position of their ads (46%), questions of editorial quality (42%) and audience duplication (36%).

Extracted from: eMarketer

The third annual Ad Network Study from ad network Collective Media, which was released today and surveyed more than 500 marketers, finds that more brand advertisers – over 70% of those queried – are adopting ad networks for their display media needs.

“The market has changed dramatically, and now brands are thinking more audience-centric rather than site-specific,” said Collective Media CEO Joe Apprendi. “Brands are buying audience using sophisticated targeting but can still ensure that the ad appears in a high-quality environment.”

The economy also has highlighted the need for better targeting to increase ROI at a lower cost for brands, said Karsten Weide, industry analyst at IDC.

“With the recession there is even more pressure to get more bang for the buck,” he said. “So what they’re looking to do is get inventory that is just as high quality as on Yahoo or Microsoft but not quite as expensive. And they want high-quality demographics.”

The vast proliferation of hundreds of ad networks is recognized by advertisers as well. According to the study, 71% of respondents feel there are too many ad networks, although they understand that all are not the same and the landscape is diversified. Typically, they use only one or two networks. “Only a few matter,” said Apprendi.

Weide agrees that advertisers are looking for quality and not just random collections of inventory.

“This survey confirms how important it is for advertisers to have ad networks that add value beyond just aggregating inventory,” he said, adding there will “definitely” be a shakeout among ad networks over the next year. “I estimate as many as one-third could go away this year, whether they go out of business, are acquired by another company or merge. There is pressure on this segment to consolidate.”

Source: DMNews, Internet Marketing

We’ve seen countless downward revisions in the overall ad spending forecasts for 2009. The economic slowdown (I still hate to use the word “recession”) has not only impacted the most vulnerable sectors like newspapers, magazines, radio, and television. Even online display is now forecast to be no better than flat year-over-year.

And it’s not only the ad economy that has morphed rapidly. Agencies and advertisers are rethinking tried and true planning and buying tactics in search of alternative, complementary ways to reach their target audience with greater reliability and efficiency. I refer to this change in buying behavior as a shift from site-specific to audience-centric buying. At the center of this phenomenon in the display ad market are ad networks, offering target audiences to brand advertisers in the form of behavioral, demographic, lifestyle, and contextual segments versus simply sites and/or sections.

If we take a close look at how display ads were sold in 2007 compared to 2008, I think we’d find a greater percentage of display ad spending in the audience-centric or people versus pages year-over-year. For example, of the $8 billion spent on display spending in 2008, I’d estimate that approximately 30 percent or $2.4 billion fell into the audience-centric category, while the majority (70 percent or $5.6 billion) was bought in the more traditional site-specific way.

With the ad market in disarray, and agencies and advertisers looking to stretch their ad dollars further, we can expect a continuing shift toward audience-centric buying. I predict that this will stabilize closer to an evenly split balance over the next two years. If this is the case, while overall display ad spending may be flat, the audience-centric segment would be growing very rapidly, even faster than search.

Read full article here.

What’s the point of using an ad network? Aren’t they just about cheap ads?

Actually, the first reason they exist is efficiency. There are tens of thousands of websites (and even hundreds of ad networks) — do you want to spend all day on the phone and chasing e-mails hunting for inventory? A network or exchange either does that legwork for you or automates it. Of course, there are also the fairly closely related issues of scale, reach and price. Want to drive a ton of impressions across a huge audience at a good price? This is the traditional sweet spot for networks and exchanges.

Wow, hundreds of networks. Where would one even begin? Let’s start with the basics. In the most common case, an independent company (the “network”) does the work of bringing all of the network sites and their inventory together to be sold. But increasingly, some network owners have a stake in the game. Portals sell impressions across their properties. And publishers start with their sites and then grow a network by placing ads on related sites in their niche. Meanwhile, “demand-side” or “agency networks” involve agencies buying inventory in bulk on behalf of clients.

What else distinguishes one network from another? Some offer low pricing and lots of inventory, but advertisers (mostly click-conscious, direct marketers) have little control over where their ads go. Other networks offer a more costly but brand-friendly experience, guaranteeing advertisers (mainly brand marketers) that they’ll know where their ads are running. Beyond that, most networks these days, including some new specialty networks, are working to improve their targeting capabilities, offering the ability to match ads to a user’s behavior (behavioral targeting) or the content of the page (contextual targeting). Capturing, buying and selling the data to perform that ad targeting is becoming a business onto itself.

What about exchanges? Exchanges try to apply the efficiency of Wall Street (all right, no giggles) to the online-ad game. The biggest difference is that while one party is in control of an ad network, an exchange operates on behalf of all the parties in the process. That starts with matching sellers and buyers. As exchanges of any sort gain liquidity — basically, volume — not only does the exchange “run itself” by matching buyers and sellers, it also tends to bring in parties that can add value to the transactions. In the case of ad exchanges, additional parties can be ad networks, which commonly use them to buy and sell excess inventory; data providers, increasingly common as data about ads become important for targeting and retargeting; and, eventually, futures players and other arbitragers.

Wow, that’s confusing. It is. That’s part of the reason exchanges have been slow to take off, as well as why they hold so much promise. When it works properly, an exchange provides what advertisers — and publishers — have always wanted: a fair way to measure and charge for the value of an ad. Who’s trying to make this happen? ContextWeb runs the Adsdaq (like Nasdaq, get it?) exchange. The Big Three search/portal players have all bought exchanges, including Microsoft (AdECN), Yahoo (Right Media) and Google (DoubleClick/AdX).

But won’t this turn the buying and selling of ad inventory into a pure commodity game, à la pork bellies? Yes and no. Commodity impressions will be priced accordingly. The challenge for every player in the system will be to use data about users, context or behavior to make each impression more valuable. That data can be brought onto an exchange by the sellers and buyers themselves, or even by third parties. Meanwhile, publishers in this scenario can not only be sellers of inventory, they can also be buyers on behalf of their traditional high-CPM customers. It’s messy, yes. But it looks more and more to be the future.

Extracted from: Advertising Age, Digital Marketing Guide: Ad Networks

Forget the lingering hopes that online advertising would remain a beacon of stability in this economy. In recent weeks major Web publishers, from Yahoo! (YHOO) to New York Times Co. (NYT) , have reported that revenues from their mainstay pictorial display ads are down.

The poor economy isn’t their only problem either. It’s simply speeding up a shift in online advertising that’s challenging the Net’s leading destinations like never before.

The chief culprits: middlemen called advertising networks. They serve as brokers between advertisers and Web publishers, connecting sites that want to sell ad space with advertisers and agencies that want to reach potential customers.

The networks stitch together ad space from many small Web sites as well as from the less visited pages of large sites that otherwise go unsold. Through the networks, advertisers can reach audiences comparable in size to those at the largest Web sites. And they often do so at a fraction of the cost of ads on major sites’ most prominent pages.

As a result, the networks, which range from publicly held ValueClick and Time Warner’s (TWX) Advertising.com to hundreds of obscure outfits, are grabbing a greater share of online advertising dollars.

Extracted from: Business Week. Click here to read full article.